Video Game Market Sees Pallid November

Sales of physical video game products sagged in November, despite the introduction of several high-profile titles and the launch of the Wii U in the second half of the month. That doesn't mean people are less interested in playing games, though. Digital downloads are becoming much more popular, and people are playing on mobile phones and tablets.

Video games, often a hot seller during the holiday season, are seeing softer sales this year. That's according to data released by NPD Group that shows video game sales down 11 percent for the month of November, compared to sales figures from the same period last year.

Sales for November totaled US$2.55 billion in the video game category, which is down from $2.87 billion for the month of November 2011. Sales figures include new software for console and portable video game devices; video game hardware; and video game accessories. Total software sales for the period, including console, portable and PC titles, came to $1.46 billion, down from $1.65 billion, an 11 percent drop over last year.

Physical vs. Download

Physical retail sales of new software accounts for roughly 50 percent of the total consumer spend on games, according to NPD. Rentals and downloads are not recorded in this report. There has been a recent shift toward software downloads of retail titles as well as micro-transactions for smaller games. Several publishers advocate full-game downloads over the hard copy versions sold in stores.

The report includes sales figures for portable games; however, it does not include sales of downloadable titles for portable systems, mobile phones or tablets.

"Physical media is becoming obsolete, and we are moving to a digital market," Mark Baldwin of
Baldwin Consulting told the E-Commerce Times. "With this in mind, it does not surprise me that physical media sales are down this year. I'm actually surprised the number is not larger."

"There are other related factors as well," said Baldwin. "Game playing is slowly moving to non-game devices like phones and tablets. Since these are almost 100 percent digital download, that shows up as lost market when it actually is not."

Money spent on digital delivery titles is one piece of unaccounted dollars. Money spent on mobile and social games is another piece.

"Right now console games and PC games are competing with an awful lot of other things that are eating up kids' discretionary money," Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times. "The money that would typically go for games is being pulled in so many directions that there's a smaller pool for games."

New Hardware Halting Software Sales

Another factor that could attribute to lower software sales is anticipation of the next generation of video game consoles. Nintendo was first with a next-generation console, launching the Wii U on Nov. 18. New hardware is expected from Microsoft and Sony.

"It's important to compare this month's results to November 2005, which was the last time the industry began to transition between console generations with the launch of a new platform," notes NPD Group industry analyst Liam Callahan in a statement. "Comparing this month's results to November 2005, retail video games sales are nearly twice as big as they were then (+97 percent). This really demonstrates the long-term health of retail sales even as many platforms are quite late in their lifecycles."

The Wii U console from Nintendo is selling rapidly, but will be a hard-to-find item this Christmas, and short supply can affect the number of dollars taken in each month.

"You have to consider that there were a limited number of the consoles available. Many people are still trying to find the [Wii U] console,"
Scott Steinberg, CEO of TechSavvy Global, told the E-Commerce Times.

Those who did get their hands on the Wii U had a number of games to add to their carts.

"I think there is a compelling mix of titles for the Wii U, appealing to both core and casual/family oriented consumers," NPD's Callahan told the E-Commerce Times. "New Super Mario Bros. U performed well, while games like ZombieU and Call of Duty: Black Ops II also ranked highly. Nintendo Land was included in the Deluxe SKU for the Wii U, so this may be a reason for softer first month sales than the Wii, as this title had a lot of content within it to offer consumers."

While the Wii U continues to sell rapidly as supplies get restocked, many consumers are waiting for the new systems, which means they may think twice about buying games for their aging consoles.

"I don't think 'holding out' is the right way to think about the November hardware results. For the current generation of consoles (generation 7), there is a huge library of catalog titles and great bundles and hardware prices. So there is a compelling offering for anyone who has not bought a console," said Callahan.

Tent Pole Titles Short of Expectations

A few key software titles continued to sell well. However, sales beyond the top five high profile games weren't enough to lift sales of video game software last month. Top titles carried the category, among the Activision's Call of Duty: Black Ops II; Halo 4 from Microsoft; Assassin's Creed III from Ubisoft; Just Dance 4 from Ubisoft; and EA Sports' Madden NFL 13.

"Overall entertainment software units decreased by 15 percent; however, when comparing the performance of the top five titles from this year to last, we see a rise in unit sales of 5 percent (games outside of the top five sold less, leading to overall declines)," Callahan stated.

November tied with August for the smallest year-over-year declines for the year, according to NPD.

Beyond the release of a handful of highly anticipated titles, there were fewer new games on the shelves than in holiday seasons past.

"About 20 percent less SKUs were released in November," said Steinberg. "I can't remember a year that was as anemic for retail launches."